Modi govt approves Rs 1.28-trillion for semiconductor sector, Rs 625 bn for making phones in India

Union Information Minister Ashwini Vaishnaw on Wednesday said that the Cabinet has expanded a key semiconductor programme by approving fresh capital of Rs 1.28 trillion (Rs 1,27,500 crore) and approved an outlay of Rs 625 billion (Rs 62,500 crore) for mobile phone manufacturing.

At a media briefing following a Cabinet meeting chaired by Prime Minister Narendra Modi, Vaishnaw said that the government had approved the 'Semicon 2.0' programme for the development of India's semiconductor design and manufacturing ecosystem.

Vaishnaw said that Semicon 2.0 will be built on six pillars:

Hailing the programme's announcement, PM Modi said that with Semicon 2.0 India’s semiconductor journey has become more vibrant.

"Semicon 2.0 will attract greater investment, create high-value opportunities for our youth, strengthen supply chains and advance technological self-reliance in critical sectors," he said.

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Addressing the media briefing, Vaishnaw said that chip production had already begun at three plants.

"This industry is a strategic industry. Many countries of the world have already declared it a strategic industry... Of the 12 approved semiconductor plants under Semicon 1.0, commercial production at three plants has already started," said Vaishnaw, who also holds the Electronics and IT portfolio in the Cabinet.

In the second announcement, the Modi government unveiled the Mobile Phone Manufacturing Scheme (MPMS) with a budgetary outlay of Rs 62,500 crore over the next five years.

The funds will be used to scale up production, deepen domestic value addition, strengthen supply chain resilience, and enhance the global competitiveness of Made in India mobile phones, the Cabinet said in a statement.

Under the scheme, the government will provide incentive support on eligible sales for the manufacture of mobile phones in India at differentiated rates ranging from 2.25 per cent to 5 per cent. It will also provide an additional incentive of up to 1.5 per cent linked to domestic sourcing of key components and sub-assemblies.

The government will offer an additional incentive of 3 per cent on eligible sales for product design and R&D aimed at building Indian brands.

Six-step plan to boost Indian semiconductor ecosystem

The Cabinet said its six-step vision is aimed at putting India on the global semiconductor map.

In the first step, Semicon 2.0 will build on the initial success in chip design. With 105 startups already developing chips, the focus will be on deepening the design ecosystem to promote the development of IPs, chip designs, and systems.

In the second step, the government will focus on machines and materials. The Cabinet said that companies engaged in the manufacture and R&D of semiconductor equipment, as well as the production of materials, chemicals, and gases essential for semiconductor manufacturing, will be incentivised.

"This will lay the foundation for the sustainable growth of the semiconductor industry. This will also help in developing the precision manufacturing industry in our country," the Cabinet said in a statement.

In the third step, the government will promote the establishment of more fabs, including silicon fabs, compound semiconductor fabs, discrete component fabs, and display fabs.

In the fourth step, the government will seek to further strengthen the ATMP/OSAT industry.

"With the success of ATMP units, the world is now looking at India as an alternative location for setting up ATMP/OSAT units. These will be actively encouraged, with a focus on bringing some of the most advanced ATMP technologies to India," the Cabinet said.

In the fifth step, the government will encourage R&D to develop more advanced nodes and other cutting-edge technologies in collaboration with leading R&D centres in India and abroad.

In the sixth step, the government will focus on developing human talent.

The Cabinet noted that around 68,000 students have already been trained in chip design, with about 315 universities currently training students in complex chip design using the latest Electronic Design Automation (EDA) tools.

Under Semicon 2.0, this ecosystem will be further developed, with deeper levels of training provided while students are still in college, the Cabinet said.